Beginners guide to trading mistakes. Common day trading mistakes with 50+ charts and examples.

17 min readDec 14, 2022

During my first six months on the trading desk, I kept shorting bottoms while occasionally buying tops as well. Naturally, I was biased toward the downside. My favorite trade was to hit the bid right at the bottom of the range for a 4 cents lower continuation move and an immediate 15-cent rip into my face. Sounds familiar?

For the most part, there are just too many small mistakes you encounter at the beginning of your career, and they are sticky — it’s hard to eliminate them. The reason we keep doing them is subconsciousness. All these “stupid decisions” were, in fact, never my decisions — It was just pure reaction actions induced by the market behavior. This is how the market is designed, it keeps fainting right and left till it bleeds you out dry, and then the move happens.

There are several types of mistakes, and it’s important to identify and recognize the consequences they may lead to:

Existential threat mistakes:

These particular mistakes will lead you to being wiped out 100% guaranteed — it’s just a matter of time. Some of them are:

aggressive scaling into the front side
not using stops
taking losers overnight

We’ll talk about these types of mistakes some other time. Nevertheless, it’s essential to understand the psychology behind these mistakes and be able to catch yourself if you are at this stage when abys is gazing back at you.

Ideally, you need to stir 100% away from these actions for at least the first couple of years. Sometimes you do need to step in front of the scary moves, but it takes time to be able to recognize these opportunities.

Otherwise, you could be taken out of the game without even a proper start.

Trading is never a game of PnL. It’s always about survival, while PnL is just a byproduct of how good you are at managing financial survivorship. The moment you are going max Risk On mode could be one of the last moments in your trading career if you haven’t seen enough before it.

Here is a good example of go big or go homeless attitude. While calculated aggression is a trait many successful traders share, gambling is not…

Trade management mistakes:

These are mistakes that slowly bleed you out dry; however, these actions are also the tools that could improve your bottom line if you use them properly with a proper market timing ( whatever it is for your trading strategy)

The key to all these mistakes is to stop repeating the same actions, regardless of whether you are making only 1 or 10 mistakes at a time — there is only one real underlying mistake. You allowed the market to affect you, and then you allowed yourself to react to what the market just did to you.

1. Attention span

When you just starting, you need to make sure that you are not spreading yourself too thin and that your attention is focused on what really matters. For the past several years, my trading setup has been six 32-inch 4k monitors, but to get there, for the first six months, I had only one 28-inch monitor. Start slow, pick one asset class, have one monitor, four charts, zone in the tape, and just try to observe and take notes on what is happening in the stock you are watching.

2. Structure your risk first, then focus on the trade management

A simple process to follow before every trade:

Evaluate your real risk, where on the chart is the level where you are wrong with almost 100% likelihood
Get the sizing based on your risk. I suggest using the same size for all your setups in the first 6–12 months of trading. Since trading is quite complex by itself, you don’t need an additional level of complexity coming from the betting size side.

3. Set targets, and give a trade breathing room. Sometimes the chart setup invalidates itself before hitting your targets or never hits your target. You need to keep collecting this evidence. If A happens, then most likely, B will happen, or the probability of C diminishes significantly. Eventually, you need to understand most of the setup intricacies to master it. But to get there, you must stay in the game long enough.

3. Always be aware of where your entry is relative to the current range

There is a numerous amount of conversations you can find about risk-reward. It has to make sense. I’m not going to go over the same information available pretty much everywhere about the risk-reward expectation. As a rule of thumb, if your win rate is less than 50%, your risk reward has to be close to 2 or higher. Otherwise, you will never be profitable. However, certain actions may increase the odds and expected payout in your favor.

Entries matter. Every entry has not only risk-reward tied to it but probabilities of the trade happening.

a) First of all, there are two ranges that you always need to consider. In my example, there is a #1 Intraday range — that is being formed by daily context, in this case by the level #2 breakout level on daily and #4 Premarket HOD. There is also current price range #5, which is always observed in relation to the “more significant” #1 Intraday range.

b) If you are looking for a mean reversion trade probability of mean reversion happening on #2a — the top 30% of the intraday range should be the highest while diminishing at the #2b zone — although we can have exactly the same setup in our current price action #5 range. From the probabilities standpoint — this would be a completely different trade even if your risk/reward expectancy may still look like the same.

c) However, while the Higher Timeframe context matters, your entries are what will define the outcome of your trade. Below I’ve outlined four different scenarios of risk-reward distribution based on your entry. Quite often, if your entries are good, you can still make money even if you are wrong. Look at scenario #3 — even if the intraday support would hold, you are still up 3–4 R on the day.

Trading is the art of making multiple independent decisions all day long while ensuring all of them fall under the same favorable conditions in the long run.

How to get great entries like in scenario #3 all the time? There is no way, and you shouldn't even try. As a trader, you need to focus on avoiding entries like scenario #1 or # 4 as a baseline rule, and then if there is an opportunity to have an entry like #2 or #3 — you will be there. While we can’t control the upside, we can always ensure that our entries have one of the best possible positions. We keep making the same small bets over and over while ensuring that probabilities and risk reward are always on our side.

While price spends a significant amount of time in the same price range, and offers multiple opportunities to position yourself, the quality of the entries plays one of the most crucial roles in how good your trade is.

Price action entry scenario — #1

Price action entry scenario — #2

Price action entry scenario — #3

Price action entry scenario — #4

4. Work on your Stop Loss Game. How many Rs are in your average stop loss?

As a starting point, I recommend using the same fixed R for all the trades and the setups in the beginning, just to measure apples to apples. For example, you are ok to lose $100 per trade.

In this case, you need to calculate the exact distance from the current price to your stop level before, so that you will have the proper size in case of the price comes to your stop level and takes you out. This is the basics of risk management. Now, if you are wrong, you will lose only 1R. This is your baseline risk management.

However, the key here is to ask yourself how, in the long run, you can minimize your average loss from 1R to 0.7R. By introducing advanced stops. Let’s go over the following:

Loss = 1R — Full stop
Loss <1R — Time + chart stop
Loss <1R — Now or never stop

#1 — is always a full stop and always a 1R stop for me. However, if I see there is a shift in price action, for example, scenario #2 on the screenshot above — price is building up above my entry, and it’s not a spike but rather a constructive price behavior — that’s when I will take it off, essentially taking less than 1 R Loss.

Sometimes when you are watching tape, you see the bid getting repeatedly slammed and with massive size. Although an entry at the bottom is not optimal, for instance, you believe you have to be in the trade. I will take the trade, but I will never give it 100% of the range since the premise of the trade is price action happening right now, then the trade has to work right away. Look at scenario 3 — you are giving it a tight stop and maybe 5–10 minutes to play out. If the bid is defended or there is just nothing happening, I will take the trade off, since my initial premise for the trade, “there is a massive seller that will slam the bid much lower,” has been invalidated. This is a “now or never” stop; you can use it for scalping when the trade has to work now or GTFO. This type of stop can be very seductive for a new trader and can be a reason for multiple losses in the same range. Therefore it’s crucial to understand there has to be only a small % of stops like this in your trading routine.

What to do if you get stopped out? First of all, re-assess why did it happen. Unless you do it, your trade is not over. You just got a new piece of information, and you need to blend it into your current view. If your trade is still right, but you fucked up the execution — get back in, but if your setup got invalidated — that’s it; the trade is over, and now is the time to wait till a new setup reemerges.

5. Trading around the core.

To be right when you add incremental size and to be correct — when you decide not to add any size — is hard. Overall, adding back increments of the size and covering them into the moves while still holding the core — is an advanced technic. It’s harder to manage — while simply trimming the position out will minimize your risk exposure starting the first cut. In the case of using this technic, the trade can still be unprofitable if there was some headache while you were adding the back the size you just took off.

Simple mistakes you need to fix to establish your trading foundation:

6. Overtrading, or death by thousand cuts

This is quite a popular mistake, and it strips you of capital really fast just due to the number of paper cuts and losses you are taking. In my experience, it happens when you are unsure about the trade, and the price is not decisive either. First, it looks like it will break out; you are getting in on top of the range, then it stuffs, and now you are out, and it looks like it will break lower; you are getting in short at the bottom of the range, but “ they are holding it,” and immediately spike the price back up right in your face. As a dry outcome, the stock price hasn’t moved much, but you have already lost 2–3R.

Stop chasing the price, put a trade on only if the entry looks like a bargain. If you have any other motivation — there is a big chance you and your capital will part.

7. Oversizing

The logic behind it is quite straightforward, you are in the trade, and you have your 1 R on, but suddenly, something happens, and you are thinking ok, “the trade is working; how can I maximize it?” This is not a bad idea, but only if you are an experienced, seasoned trader. If not, well… you and your capital are more likely to be parted again. As you begin your trading career, it is essential to focus on creating great habits. There are times and places to go all in and hit hard, but again after a couple of years, you will have an idea what they are.

As of now, usually oversizing leads to feeling shaky in the position, cutting it short before it hits your stop level, or holding till it hits, and now, since you have added at the bottom, your loss is 2R or 3R, instead of 1R. Regardless of how you look at it, the main psychological motivator for it is greed, and the expected outcomes are:

increased trading in and out of the positions (overtrading)
increased losses
the toll on your mental capital since higher risk adds extra mental pressure.

8. Not sticking to the stock when it works for you

This is super crucial for intraday trading. If there is a stock that you have a good read on, and 2 out of 3 trades you put on are green — keep it on the screens and don’t let it go. Usually, stocks like this provide several opportunities throughout the day, and you better be ready for them, as opposed to constantly scanning for something new

8. Not having a plan

It’s kind of obvious, but I’ll reiterate. Before you enter a trade, you need to know your risk level and chart levels: at what price point, and after seeing what kind of price action you will adjust your position? Your chances to survive are literally negative if you do not have a plan before every entry.

9. Write your daily trading journal daily.

If you are not doing it, your likelihood of making it in trading is non-existent. While in reality, you really need to be obsessed with trading your first couple of years, you can emulate the same obsession with the hard work you are putting in because if you are not — what is your edge?

Always Be working on something! Have daily, weekly, and monthly goals.

Learning to trade is a continuous process that never ends. As time goes by, your daily journals contribute to your weekly reviews, your weekly reviews turn into monthly goal sessions, and so on… If you want to stay or excel at this game — Always be working on something

Trading journal example #1

Checklist to go over before every trade:

Premarket. Identify if you have any bias and delete it from your mind.
Mark Premarket highs and Y highs premarket (also to clean the charts update volume profile, and get rid of high and lows — they are not extended, and I do not see them.
Is the volume abnormal ( 200 K, 500 K candles?) — That’s where you ALWAYS lose money.
Is the time ok for certain setups?
Are you close to MATA or VWAP, or level A?
Evaluate candle formation prior to the setup ( grind/ steep)
Start with where it would be a decent risk/reward. Add R/R fibs to the chart! (prior to the trade) Take covers of it.
What are the probabilities?
Where is the right stop?
How much risk I’m willing to place on ( if one entry — should be 0.6–1R)
If a frontside entry — identify if there is a level before HOD that will signal you to get out. (or half and a half) If Backside, make sure your stop is against A level.
Go over possible levels to watch (Reclaim, HOD, LOD, VWAP, support, resistance, MAs, g/r level)
Is it easy to cover or hard, and is this long?
Where is it in regards to the 50% day range?
Is it above premarket high or Y high? Is it holding there?
What is the stock telling you so far

Trading journal example #2

What to work on:

Wait (Do Not Keep Looking and Searching) > Wait till you See > Think how to place risk
Draw Momentum and Range levels before an entry (Mandatory)
Start every entry by finding where were the previous “right” entries. (Mandatory)
Stop adding/ shorting after higher lows were established > Trading of OHLC chart tomorrow to see a clearer picture.
No Bottom of range shorts. There is no point even watching the tape when there is a range trade unless the chart setup is there.

Trading journal example #3

What to work on: (print it out) and write.

Wait (Do Not Keep Looking and Searching) > Wait till you See > Think how to place risk.
Is it my niche stock? Bio, gap up, short?
Name the setup in writing ( Tape, front 3, range level)
Go over to see where the trend of HH and HL got ended.
Draw Momentum and Range levels before an entry (Mandatory)
Draw Trend lines (Mandatory)
Draw where were the previous “right” entries. (Mandatory)
Make sure R/R is in place. R/R should be favorable for the range I’m taking it (Mandatory); write down where in the range (top, middle, bottom — is only for hot momentum setups and even so not preferable )
Write down the time and risk on and level.
Stop adding/ shorting after higher lows were established > Trading of OHLC chart tomorrow to see a clearer picture.
No Bottom of range shorts. When there is a range trade, there is no point even watching the tape unless the chart setup is there.

10. Chart examples of #1 Beginning Trader Mistake. Shorting bottoms =same as buying tops.

Shorting bottoms always leave you with the worst risk reward possible, and on top of this, since it’s a current intraday bottom — the probabilities of continuation are really not in your favor at this moment in time. How do you get sucked in? By watching a tape. They make it look like there will be a massive implosion in literally a second, but the moment you get in, they rip your face off.

The best way to deal with this mistake is a) to avoid it completely b) use now or never stop (you have to be really good with tape reading to do so, or you’ll be chopped). As a rule of thumb, this trade works best during fire sale. If not, it’s hard to time it.

11. Chart examples of #2 Beginning Trader Mistake. Choking trades = not giving proper stops + constant in and out trading.

Everything about the markets is designed to shake you out of the position: breaking news coming out of nowhere, Twitter chatter, vague price action, shaky tape. However, one of the best indicators is the price itself. Yes, there are times when a fundamental change occurs, and you need to adjust your position right away, but 99% of the time more likely this is just noise. Your job as a trader is to identify levels where your thesis is proven wrong and stay with a trade and withstand whipsaw until this happens.

12. Add “Great Setups I missed” to your daily journal

I’ve outlined below a couple of examples of daily trader’s exercises with charts examples: “Great setups I missed.” Really execute too. After you are done with your journals, pull up all intraday scanners, and go over each setup that was there but you didn’t participate in it. Internalize each opportunity, and prepare to do better tomorrow!